Access!Theft: The!Big!Problem!with!Unlimited!Long!Distance!Plans
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1 Access!Theft: The!Big!Problem!with!Unlimited!Long!Distance!Plans Presented!by: David!Erickson President,!Free!Conferencing!Corporation Jeff!Holoubek Director!of!Legal!and!Finance,!Free!Conferencing!Corporation Ross!Buntrock,!Esq. Arent!Fox,!LLP October!15"16,!2009
2 About!Free!Conferencing!Corporation An!end!user!of!telecommunications!services! formed!in!2001 Free conference!call!product!allows!each! participant!to!pay!for!their!own!ld!and!pay!their! own!way!to!a!call!by!dialing!a!long!distance! number,!rather!than!expensive! host!pays 8XXX! plans Fee"based!premium!services Popular!among!nonprofits,!entrepreneurs,!and! government!agencies
3 Our!Product!Fosters!Innovation!and! Economic!Recovery! Provides!consumer"preferred!alternative!to!expensive!800"conference!call! services; Allows!collaborators!to!share!costs!evenly,!rather!than!requiring!a!single"payer!to! pick!up!the!tab; Minimizes!the!need!for!expensive!travel!and!fosters!practical!telecommuting! options; Promotes!collaboration!and!efficiency!within!government!agencies and!nonprofit! organizations,!putting!tax"payer!and!philanthropic!dollars!to!better!use; Enables!entrepreneurs!to!constrain!costs,!better!predict!expenses,!and!promotes! collaboration!among!businesses; Promotes!important!competition!within!the!telecommunications!sector,!as! envisioned!by!congress; Promotes!ubiquitous!access!to!telephone!network!and!provides!LECs!with! important!revenue!diversification!in!the!face!of!diminishing!landline!subscriptions.
4 Obama!Campaign,!and!Business,! Religious/Charity!Organizations! Are!Biggest!Users Obama!for!America Used!services!to!connect!to!the! ground!troops in!a!campaign! celebrated!for!its!use!of!technology;!5!million!minutes!of! pay"your"way conferencing!used!during!campaign The!Salvation!Army Connecting!9,000!employees!at!over!1,600!sites!nationwide;!saving!as! much!as!$10,000/month The!Hygeia!Group,!Inc.!of!Salem,!Virginia Small,!entrepreneurial!company!using!technology!to!improve!access!to! healthcare!nationwide!through!innovative!staffing!models;!praise ease! of!use!and!high!quality!connections offered!by!free!conferencing The!Kidney!Cancer!Association Thousands!of!dollars!in!annual!savings!used!to!fight!kidney!cancer!rather! than!inflating!ixc!profits
5 AT&T,!Sprint,!Qwest,!Verizon!Are! Name!Calling But!Wont!Dispute!Law!or!Facts Despite!epithets!hurled!at!Free!ConferenceCall and!lecs,! no!ixc!denies!that!their!subscribers:! dial!the!telephone!number use!freeconferencecall s services,!and that!ixcs!collect!subscription!fees!from!them!for!these!calls: IXCs!aren t! losing!money on!unlimited!long"distance!unless! they re!making!false!allegations!!to!the!fcc!and!sec. IXCs!consistently refuse!to!provide!data!regarding!retail!long" distance!revenue.
6 How!Carriers!Make!Money! The!Distinction!Between!a! Carrier and!an! Anti"Carrier We!call!a! Carrier a!carrier!because!a!carrier! makes!its!money!carrying!traffic.! Conversely,!an! Anti"Carrier makes!the!most! money!when!it!does!not!carry!traffic.!!in!fact! it!makes!the!most!money!when!it!does!not! carry!any!traffic!at!all.! The!Anti"Carrier s!incentive!structure!is! opposite!that!of!its!unlimited!long!distance! offering.
7 Minute!Pricing Unlimited!Long!Distance!Plans!result!in!selling!unlimited!access to!the PSTN!to!consumers!who!use!the!most!minutes. An!extreme!example!isso"called! VoIP!carriers selling!unlimited!long!distance!for!$1.70! per!month!(12!months!in!advance). SpeakEasy ( call!anyone!anywhere Free or! Unlimited carriers!cannot!and!will!not!deliver!on!promises!to!provide! consumers!with!unlimited!long!distance!to!any!destination. While!AT&T!doesn t!directly! block (unlike!sprint),!it!does!the!same!thing!by!refusing!to! pay!for!termination.!!actually,!it!is!worse! it!is!theft. Result!is!that!effect!of!blocking/non"payment!negative!is!borne!by!consumer!of! free or! low!cost or! unlimited calling!and!not!the!provider.!!the!consumer!pays!the!price! of!the!anti"carrier s!inability!or!unwillingness!to!deliver!on!its!promise.
8 Usage!Pricing IXCs!have!adopted!an! unlimited pricing!model!that! has!no!per"minute!charges. While!perhaps!a!clever!marketing!plan,!according!to! their!own!legal!arguments,!this!is!not!a!rational! economic!model. This!customer!is!not!sensitive!to!the!price,!duration,! or!location!of!the!call. This!practice!actually!attracts!customers!who!wish!to! make!lots!of!calls. IXCs!refuse!to!provide!data!demonstrating!any!loss.!
9 Payment!Models Traditional!Carriers!charge!based!upon!the!exact! number!of!minutes!used. Some!Carriers!choose!to!have!the!customer!pre" pay!for!a!pre"selected!(unlimited)!number!of! minutes!creating!the!opportunity!for! breakage profits.! The!Carrier!reserves!the!right!to!charge!for! minutes!used!that!are!above!and!beyond!the! number!of!minutes!pre"selected!by!the!customer. The!Anti"Carrier!uses!a!pre"paid! Unlimited model!which!it!is!actually aware may!prove!not!to! recover!costs!of!service.
10 Should!IXCs!Price!to!Their!Costs!or!to! Their!Competition!or!Alleged!Costs? The!Traditional!Carrier!prices!to!its!cost!choosing!to!mark"up! each!minute!or!create!an!average!priced!minute!based!upon! the!cost!of!that!minute. The!Anti"Carrier!prices!to!the!competition!in!hope!of!enticing! more!customers!to!use!its!service.!! A!good!example!of!an!Anti"Carrier!are! VoIP carriers!which! sells!the!same!pstn!access!that!the!traditional!carrier!sells! except!that! VoIP carriers!sell!their! unlimited products!at! the!monthly!rate!of!$1.70!for!an!unlimited!number!of! minutes. This!is!a!VERY!slippery!slope!that!is!already!threatening!the! ubiquity!of!and!the!unfettered!access!to!the!pstn.
11 Should!Customers!Shoulder!the!Risk!that!They!May!Use! More!Minutes!than!Their!Unlimited!Calling!Plan!Anticipates?!! If!a!Carrier!wants!to!offer!Unlimited!Long!Distance!as! a!marketing!strategy!to!capture!customers,!they!are! free!to!do!so. However,!if!the!Carrier!decides!to!take!the!risk! associated!with!mismatched!costs!and!usage,!then! the!carrier!should!be!responsible!for!that!risk.!! Shifting!that!risk!to!the!consumer!by!forcing!the! consumer!to!accept!poor!quality!or!blocked!service! contravenes!basic!notions!of!consumer!protection! and!fairness.
12 Does!Free!Conferencing!Raise!the! Price!of!Long!Distance? Anti"Carriers!(those!who!offer!Unlimited!Long! Distance!Plans)!argue!that!when!a!customer!calls! into!a!conference!call!the!carrier!incurs!the!cost!of! that!long!distance!call!without!collecting!any!more! money,!and!that!this!raises!the!cost!of!long!distance! when!they!re"average!their!plans.! Traditional!Carriers!never!make!this!argument,! because!unlike!the!anti"carrier!that!makes!the!most! money!when!it!carries!no!traffic,!the!traditional! Carrier!makes!more!money!when!it!carries!more! traffic.
13 Does!Free!Conferencing!Raise!the!Cost!of! Providing!Long!Distance!Service? The!Anti"Carrier!says!that!free!conferencing!services!raise! the!price!to!consumers!because!they!encourage!high! volume!usage!which!raises!the!average!cost!per!minute. Contrary!to!this!opinion,!Customers!who!use! FreeConferenceCall.com are!essentially!making!several! long!distance!calls!simultaneously!to!multiple!parties!with! only!one!long"distance!call,!hence!the!name! Conference! Call.!!! The!conference!caller!is!more!efficient,!saving!time! otherwise!spent!calling!multiple!parties.!!thus,!the! argument!can!be!made!that!this!efficiency!actually!reduces! minutes!used,!and!therefore!freeconferencecall.com saves! the!customer!long"distance!charges.
14 Is!Free!Conferencing!Paid!for!by!Long! Distance!Carriers? No,!Free!Conferencing!is!free. A!FreeConferenceCall.com bridge!is!simply!a!location! that!is!one!long!distance!call!away!from!the! consumer.!the!consumer!makes!a!long!distance!call! to!get!there!and!the!consumer!pays!for!the!call! based!upon!the!rate!and!usage!dictated!in!his!long! distance!plan. The!Consumer!pays!according!to!the!plan!marketed! by!his!long!distance!carrier.
15 How!Should!the!FCC! Fix the!system? If!the!FCC!merely!enforced!the!rules!already!in!place,!requiring ALL! companies!that!utilize!the!pstn!to!pay!for!their!use!of!the!pstn,!then!all! Carriers!would!either!price!to!their!costs!and/or!they!would!stop!offering! Unlimited!Long!Distance!Plans.!! Callers!would!again!be!price!sensitive!and!natural!market!forces would! guide!behavior!of!market!actors. Carriers!would!once!again!be!happy!to!get!as!much!traffic!as!possible. Carriers!would!not!want!to!block!calls!or!use! exhausted!lines. Carriers!would!pay!for!the!services!they!use.
16 Difference!Between! Carrier!and!Unlimited!Long!Distance! Anti"Carrier Issues Carrier ULD! Anti"carrier How!Money!is!Made Carrying!Traffic Not!Carrying!Traffic Minute!pricing Per!tariff!(or!avg.!min.!cost) None!(no!per"minute!price) Usage!Pricing Per!minute!used None!(unlimited!usage) Payment!Model Post!(some!post!&!pre!mix) Pre"paid What!do!they!price!to Cost Competition Risk!Level None!(low!!on!avg.!Min.) High Access!Stimulation For Against Subsidizing!Conferencing No Yes Conferencing!Raises!LD! Prices For!Customer For!Carrier User!desensitized!to!cost No Yes User!thinks!some!calls! should!be!blocked None None
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